Barriers to employment holding small businesses back

Small businesses are saying that despite recent tough conditions, they are looking forward to growth in the next 12 months, off the back of improved economic and political certainty, however many are reluctant to grow by hiring staff due to too many policies and procedures.

Although small businesses are matching the wider economy in growth terms, they are falling behind in increasing their employee headcount, with one third (31%) of respondents employing fewer people today than 12 months ago, according to the latest Westpac Small Business Report in collaboration with Deloitte. The most common hurdles to hiring are financial (38%), only needing help occasionally (28%), and wages and penalty rates (24%) – suggesting more support is needed across industry and government to help businesses break down employment barriers.

Ganesh Chandrasekkar, General Manager of SME Banking at Westpac said: “Many small businesses faced tough conditions over the last six months with a slowing economy and tightening margin pressure, however there is some light at the end of the tunnel which can help boost employment.

“Given recent RBA interest rate cuts, a boost in infrastructure spending and a better-looking housing market, many small businesses say they are optimistic about the coming 12 months. “One way to boost confidence back into the market is to remove the complexities and challenges small businesses face when it comes to hiring. If every employing small business took on one additional staff member, that is 900,000 jobs. Even if we could create a fraction of that amount by removing employment barriers, it would make a big difference,” Chandrasekkar said.

To supplement household income, one third of small businesses have taken on a second job or ‘side hustle’, revealing their most common fear is having no financial security. This is particularly common 1 ABS (2019), 8165.0 – Counts of Australian Businesses amongst non-employing businesses (41%), female small business owners (40% compared to 25% of males) and industries feeling more exposed in the current environment such as agriculture (52%) and arts (45%).

Many small businesses are taking advantage of the gig economy to embrace on-demand solutions that provide flexibility and easier access to casual employees, and it’s growing quickly – increasing 68 % in revenue terms in one year in NSW2 . However, one in five (20%) small business owners have no income outside their business and 15% would lose equity in their home if their business were to fail. The average small business household gets two thirds (63%) of income from the business.

“This places an extraordinary amount of pressure on business owners, their families and employees, for the business to perform. With over half of Australian small business owners using their personal savings to establish their business, this can have a deep impact on their mental and financial wellbeing,” Chandrasekkar said.

About Deloitte

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